gdp. contracting at almost 9% of gdp. 800,000 jobs were lost in january 2009 at the time the president put his hand on the bible and was sworn in. where are we today? with the passage of the recovery about, with the successful effort to save the auto industry and other measures that have been taken, we've added 3.7 million private sector jobs over the last two years and 257,000 just last month. now, we all recognize we still have a long, long way to go, and that too many americans are still out of work. too many americans are hurting economically. but we are turning the corner. we have turned the corner. and we must build on this fragile recovery. and we certainly should not go back to the same policies that got us into that mess in the first place. now, the fastest and most effective way to reduce the deficit is put americans back to work. and in fact, the congressional

budget office estimated that we could cut the deficit by one third if our economy were at full employment. how do we help nurture that? we begin bypassing the payroll tax cut extension and it looks like we may have good news on that front. we begin by making sure that the millions of americans who were out of work and unemployed through no fault of their own continue to get support, which helps their families and the whole neighborhood and economy around them. but the president's jobs plan that he submitted in september also includes a lot of other elements that are just sitting in this house of representatives and haven't moved. his plan includes $50 billion for immediate infrastructure investment, to help put people back to work, rebuilding our roads, our bridges, expanding broad band, and it contains a

long-term plan for infrastructure development. it stands in great contrast i will say to the infrastructure bill that we're taking up on the floor of the house this week, which doesn't begin to do the job in which a former republican congress ann in re lahood, now secretary of transportation, called it the worst transportation bill he's seen in 35 years. as we nurture the recovery, we have to act now in a steady and predictable way. this budget does that. the budget exceeds the deficit reduction targets. it consistently lowers the deficit as a share of the economy until it's under 3% of gdp and stabilizes a debt as a percent of the economy. the president does this not by arbitrarily slashing defense,

but by taking a balanced approach. so the question is not whether to reduce the deficit, the question is how do we reduce the deficit? and the president's approach is the balanced approach. it takes the frame work we saw from the bipartisan commission and it adopts the very cuts that we made in discretionary spending in earlier months. it cuts another $600 billion in mandatory spending. and it does eliminate a lot of the special interest tax breaks and asks the wealthiest of americans to go back to paying the same top rate that they were paying during the clinton administration, a time when the economy was booming. and that balance is what our republican colleagues have objected to. this is a question of choices. if last year's republican budget

is a sign of where we'll head this year, they take a lopsided approach, further slashing investments in education, in science and research and infrastructure, which are critical drivers of the economy. and they do slash the social safety net in that they cut $700 billion from medicaid that helps people like the vel nurable seniors in nursing homes, and they ask seniors on medicare to carry the entire risk of rising health care costs. and that's their choice. but that's not a balanced approach. i think what we see here in the president's budget is a responsible approach that takes that balanced approach to tealing with a very serious problem. and with that, mr. chairman, i thank you for the opportunity. >> my pleasure. mr. zinst, the table is yours. >> thank you, mr. chairman,

ranking member and members of the committee. thanks for having me here today to present the 2013 budget. as the chair han said, before i joined omb three years ago, and i have now been there for three years and been involved in the budget, so i feel like i'm in a good position to talk about the president's budget. but before that, i spent 20 years in the private sector. one thing i found that was helpful in the private sector is to boil things down to a few graphics. so it's okay if everybody, i thought i would use my few minutes to walk you through the highlights of the budget using i hope these two screens. i'll cover first the current policy baseline. next, the key elements of deficit reduction. and then and overview of our investments. and finally the bottom like of

the president's budget. let me start with the baseline. we believe we have a baseline that accurately reflects current policy. in essence, this is business as usual. the baseline includes the extension of the 2001 and 2003 tax cuts, estate and gift taxes. second, the permanent extension of amt and sgr, we believe this presentation is more honest and enforcement of the joint committee sequester and accounting for future disaster costs rather than ignoring them. the baseline results in an annual deficit of 4.7% of gdp at the end of the budget window in 2022.

this is where we start before our policies take effect. let me now turn to our deficit reduction policy. last april, the president put forward a frame work to achieve more than $4 trillion in deficit reduction. he maintained the $4 trillion in his proposal to the joint committee last september. this year's budget is very similar to the september proposal. with the addition of a year to the budget window. as you can see on the far right in that green bar, this budget includes $5 trillion of total deficit reduction. let me walk you through the key elements. you start on the far left, you'll see $676 billion in saiings from the appropriations bills enacted last year,

including the 2011 appropriations in april and the saiings from the 2012 appropriations. next, over $1 trillion in reductions in spending consistent with the caps in the bca. next, there are $362 billion in reductions for medicare, medicaid and other health programs that will make these programs more effective and more efficient. then $272 billion in savings from reforming nonhealth mandatory programs in such areas as agricultural, federal-civilian work erie retirement. and the pbgc. the next category is $1.5 trillion in revenue for deficit reduction, including the expiration of the 2001 and 2003

tax cuts for the highest earners. the $1.5 trillion is a net number as we further cut taxes for the middle class and small businesses. next, $617 billion in net savings from capping oko and investing in a six-year surface transportation reauthorization. that closing the back door on security spending. then there are other net savings of $141 billion, including program integrity and transportation funds that are no longer necessary. as a result of these proposals, debt service cost decreased by $800 billion. finally in that pink bar next to the green bar, there are $176 billion of investments in short term job initiatives that cuts the other way. so these are investments. this is the remainder of the

$354 billion not spent in 2012. i want to be clear that we do not count the sequester in our total deficit reduction. we believe that the sequester is bad policy and we propose that it be replaced by this larger package of deficit reduction. but be clear, the sequester is still in place. the president believes firmly it's a very important function that we balance the deficit reduck shunl. these represent more than $5 trillion in net deficit reduction. we continue to make key investments in priority areas. tax breaks amounting to $352 billion and continued investment in our priorities, including education and job training for american workers, innovation in

rnd, cheap energy and infrastructure. we make these investments in a budget that abide by the very tight spending caps that makes hard tradeoffs. on the left, i compared the adjusted baseline that i talked about in that first slide with the results of the president's policies. as you can see in 2022, deficits from the president's policies are below 3% of gdp compared to 4.7% in the baseline. further more, debt as a percent of gdp is stabilize from 2018 on. this is important for maintaining a strong investment environment. the president's budget replaces the sequester with a balanced approach to deficit reduction, with $2.50 in spending cuts for every dollar of revenue increases. we've made tough choices and we all need to work together to

maintain this balanced approach. in closing, as a business person, and now omb acting director, i believe that the president's budget makes the right investments to make us even more competitive in the global market place and achieve kg declining deficits and stabilizing our debt are critical for business confidence and investment. this is good for business and the middle class and good for america. now i would be happy to take questions. >> thank you. we'll do great if our answers aren't so long and we don't filibuster here in the house. so intles put aside the fact th we're using different tenure windows to get from the $4 trillion claimed and the $5 trillion claimed. let's just go to the $4 trillion

claimed, which is what the budget documents make. because there's a difference in ten-year windows and we would all agree on that. so you're saying that the policy changes in this budget reduce the deficit by $4 trillion, correct? >> right. >> so bring up figure two. there it is. let's talk through that, using your numbers. these are omb numbers. to make this $4 trillion claim stick that this budget does this, the blue bar claims credit for the budget control act, 2.3 trillion. this is a law that was already past. how can one claim that this budget achieves these things when this is something congress already passed. and i would add congress passed this over the president's objections.

so let's take away that claim, because that's not in your budget. you can't claim you're achieving this when it's a law we already passed. so now we're down to the war gimmick. let's claim savings on spending that's never going to be requested or spent and all of a sudden claim that's going to save us $850 billion. i don't know what part of the private sector you come from, but if we're saying we're staving money that we were never going to request, never going to spend, i don't know how you can say you're saving money. now you're down to the doc fix. nobody wants to see there 27% cut occur. but it's happening. it's in law. it happens at the end of the month. so we're just assuming that they're not going to get cut and that's $430 billion in your numbers. and then let's take off the

interest savings that you're attributing to all these claims, and here's what we're left with. we're left with a budget that has only $400 billion in deficit reduction, over a ten-year window. if you strip out these accounting tricks and budget gimmicks, it's a ten-year budget that spends $47 trillion with a net deficit reduction of $400 billion. so i just don't understand how you can claim anything other than this. let's go to figure number one. let me ask you this. how much does the debt increase under your budget? >> can i respond to the one you just did? because you keep building on top of it. >> let's go back to figure two. >> that would be much more helpful. first of all, we all agree that

the $2.3 trillion came from the bca, and we've been talking consistently about a minimum of $4 trillion of deficit reduction. this reminds me of a marathon and starting the race. we started the race months ago. second, oko closes the back door -- >> does that get you there, then? why do you count the stimulus spending? >> i'm sorry? >> if you're going to count things that happened in the past, why do you only count the -- >> it's part of the budget -- >> it's not in the numbers. >> so the dca this summer, that counts towards the $4 trillion deficit reduction we've been talking about. secondly, very importantly, we are closing the back door to

spending by capping oko. cbo scores it as a saving and it's this president's policy that led to the drawdown for getting our troops out of iraq and draw down in afghanistan. i don't know how you're cutting the chart here, but you've left off $1.5 trillion of revenue that needs to be raised, revenue that's part of the deficit reduction. again, i'm not sure how you're cutting it, but there are $360 billion of mandatory savings from health care, and there's another $270 billion of savings from other mandatory programs. so there's further savings there. and then atop all of that, the debt service is bringing down the spending. >> that's what balance sheets

do, we net things out. when you net all of this out, not claiming credit for something somebody else did or the congress and the president did before, you can't say this budget has policy changes which achieves a result which was achieved before. with respect to war, we pass supplementals to fund wars. so if there's a back door, it's already closed. if we're pulling out by some date certain, it's not as if it's a surprise. it's a flaw in the baseline that they assume we're going to be at a full fledge war for ten more years. >> i think the cbo -- >> like i'm saying. please don't interrupt. >> okay. >> we pass supplementals. it's not a back door if we're not in war, we don't pass supplementals. when you net this out, this budget using your own numbers

has a net increase of spending of $1.5 trillion and a net increase of taxes of $1.9 trillion and that is how you result with the $400 billion of deficit reduction. these are your numbers, not somebody else's. let me ask it a different way. how much does this budget add to the debt? what's the nominal amount of money that this adds to the debt? >> i think the right way to think about it is as debt as a percentage of gdp. >> no, but how much actual money is added to the debt? >> the nominal amount was pulled from one of the tables. let me have my team gather that while i answer the question the right way. you think about the debt as a percentage of gdp. and this budget stabilizes debt as a percentage of gdp, which is very important for maintaining the investment environment that we all want, which is making america the right place to

invest. i think we would all agree that the cbo is the referee and i want to make it clear that cbo scores oko as savings. >> so, if we assume we are going to be at war for ten years in the baseline, because that is what the law requires cbo does by the way. it's not cbo's fault. and all of a sudden we are going to have a pull out from iraq and afghan before ten years is over, this money is all of a sudden a spending cut, it's savings? >> savings relative to the baseline according to the cbo. it closes the back door on discretionary spending. >> if this is how we measure reality heaven help us. i'll use your budget and your chart, bring up figure one. i have your number for you. so we will get into it if you want. you are adding $11.4 trillion to

the debt, excuse me, the baseline adds that to the debt. that means if we do not do anything. we sit still, we add $11.4 trillion to the debt. your budget adds $11.2 trillion to the debt. how on earth do you claim deficit reduction when your own numbers show instead of increasing the debt by 78% it increases it by 76%? >> two points that i would make. 11.4 to 11.2. one, it's important that we are starting with an honest base with -- with an honest baseline. the idea that we patch it year over year is not a reality. you have to start with the right

baseline of where we are and we do that. it's better that we face into the wind and nowhere we are. secondly. a lot of this is inherited. it's inherited from an administration that passed a tax cut that was unpaid for and a part-d medicare unpaid for, two wars unpaid for. and then we walked in as congressman vanhollen said to an economic situation that was the great recession. >> if the wars are unpaid for, how do you claim savings from them? >> they were unpaid for at the time and we are capping oko and getting the savings. >> i think you see my point. if had this -- we agree the baselines are messed up around here. that is not, that is not a source of contention. but if the baselines are messed up and we a agree, you cannot have your cake and eat it too. you can't say the budget is cutting the deficit by $4 trillion. if you add this all up, net it

all out, it's a $1.5 trillion. these are your numbers, $1.5 trillion in net spend increases and a $1.9 trillion net tax increase and that results over the ten-year window of a measly $400 billion of a deficit reduction over a ten-year period. and look, i know we love to go back and bash the last administration, this is your fourth budget, it's not as if the president came ins of a month ago. this is his fourth budget, a four years of trillion dollar deficits. a repudiation of cutting the deficit in half of his last year of his first term. of his term. i don't know how you can run away from your own numbers. >> i want to go to the bottom line. and the bottom line here is more than $4 trillion in deficit reduction. the bottom line here is that we get the deficit as a percentage

of gdp, below 3%, and we get to stabilize debt as a percentage gdp. do we have more work ahead? absolutely. this budget reaches an important milestone. >> i want to give chris his time and ask one last question. you claim to want to give ipad more tools to consider quote value based benefit design changes. but you also prohibit ipad from changing costs for arrangement of beneficiaries, if you are saying that but ipad now will have the power to design, value based benefit design changes, what does that mean? >> at the end of the day, we put forward in the budget more than $360 billion of health care savings, what they are based on is what i've seen in the private

sector and i know you've seen, and there's a doc in the room, there's tremendous variation in how medicine is delivered across the country and there's not a great correlation in how much it costs and how it is. we need to drive to that intersection of lower cost and more effective healthcare by decreasing variation in care. driving towards best practices. having the same type of productivity increases that other sectors have enjoyed in healthcare. productivity means you drive down cost and increase quality at the same time. we are driving toward more productive, efficient, and effective care for our seniors and we need to continue to do that. >> we are going to give ipad more power to value how that is achieved? >> ipad is a back stop on the system, we are making sure we are driving toward more effective, more efficient care and that we are not in any way

violating the basic compact with our seniors the to provide them quality care. >> mr. van hollen. >> thank you mr. chairman and again thank you director zients for being here. let me pick up on a couple point the chairman raised. the simpson's-bowles commission set $4 trillion in deficit reduction as their ten-year wind window. and they set something in that range. included in their recommendations was reducing discretionary spending by actually over a trillion dollars. as part of the budget control act we passed we cut discretionary spending by approximately $1 trillion, it seems reasonable and i think ordinary americans watching this

proceeding would agree that you should be able to count the effort that we made already towards the $4 trillion, after all it was recommended we do it and we did it. that is a trillion dollars. we also, as you pointed out, put in place this mechanism to achieve another trillion dollars through a sequester, it has across the board cuts to defense and nondefense investments and what you proposed is another better, more balanced way o achieving that $1.2 trillion deficit reduction. just because it's built in that assumptions that this massive across the board cut that nobody in this room i think thinks is

the best approach to doing that, just because you came up with a better way of doing it doesn't mean that your budget should not be credited with that. that's common sense. let me is say something about the war savings, if you look at the appropriations budgets today, they are already using so-called or oko or savings as a bit of a slush fund when it comes down to it. the reality is closing the door on that slush fund, i believe will achieve real savings as we move to the out years and the decisions that the president made with respect to afghanistan and iraq will help to speed up that effort. i would point out that the chairman, when he presented the republican proposal here before the budget committee last year and said that their budget achieved a $5.8 trillion cut out of the cbo baseline, that included the oko spej. it does.

but, we will have that conversation. because cbo includes that in their baseline as you pointed out. >> yes yes. >> let me turn to what is the essential question that we face, in this committee, this congress and the country which is how do we achieve the deficit reduction we all recognize we need to get to over the ten-year period, how do we, you know, get the balanced budgets over the longer term and stabilize the debt as a percentage of gdp and really that means that there are choices to be made. and, you know, 98% of our republican colleagues in the house signed this pledge saying they will not close one tax loophole for the purpose of deficit reduction. not one penny can go to deficit reduction from closing a tax loophole. you get rid of a subsidy, you cannot use that for the purpose of deficit reduction. i think what the president proposed is that we want